Whether you just turned 18 or you’re about to graduate college, it’s important to establish credit as a young adult. Without a credit history, you won’t be able to finance large items such as a home or car down the road.
3 Things That Help Build Credit
In some cases, young adults don’t even realize they already have an established credit history. If you’ve been an authorized user on your parent’s credit card, or are paying off student loans, it’s likely you have some credit to your name. Before starting anything, you should check your credit by requesting your credit reports from www.annualcreditreport.com and your credit score from a trusted source. Look for any errors on your credit reports and correct any that you find.
Whether you have credit or not, you can move forward in building your credit. Here are three things you can do to build credit over time:
- Get a credit card – Applying for a credit card is a great starting point if you’re a young adult with no credit history. There are two types of credit cards out there: secured and unsecured. Secured credit cards work just like an unsecured card, but your credit limit is based on how much money you deposit into an account with the provider. The fees may be higher, and not all providers report payments, so try to find one that does. If possible, you should apply for an unsecured credit card. These “regular” credit cards generally come with lower fees, higher credit limits, and providers will report your payments to the credit bureaus. But to qualify, you’ll need to meet specific credit requirements.
- Pay bills on time – If you pay monthly bills such as a cell phone, internet, or rent, it’s important that you pay them on time and in full each month. Phone, utility, and internet bill payments aren’t generally reported to the credit bureaus, but your providers usually will report any missed monthly payments and your credit score can be negatively affected. As for rent or mortgage payments, some landlords will report them to the credit bureaus. Make sure you ask your landlord if they’re able to do this. If they don’t, you can sign up with a service such as Level Credit to get your monthly rent payments reported by a third party.
- Consider an auto loan – If you find that you need a car in order to tackle the real world, taking out an auto loan is a win-win situation. When you take out a loan, you’ll help build your credit while getting a car. If you have little to no credit and you’ve been turned down by conventional lenders, you’ll probably need a subprime auto loan. Each subprime lender has different requirements, so make sure you ask questions during your car buying process.
The Bottom Line
It’s a tough world out there, and not having any credit could keep you from being able to make large purchases. Even if you’re just starting out, it’s better to start at the bottom and work your way up than struggle with no credit. Your credit will improve with time as long as you keep up with all your payments and keep credit card balances low.
If you’re a young adult and are considering taking out an auto loan, but aren’t sure where to start, let Auto Credit Express help. We work with a nationwide network of dealers who have the lending resources available to help credit-challenged car buyers get the financing they need. Get started today by filling out our no-obligation auto loan request form.
